Comcast has officially dropped out of the bidding for the 21st Century Fox assets, clearing the path for Disney to move forward. Comcast still plans to pursue Sky in the UK. But by dropping its Fox bid, Comcast has also foregone the opportunity to take control of Hulu (by virtue of combining its 30% stake with Fox’s 30% stake). Presumably now Disney will take control of Hulu.

I believe this is a major missed opportunity for Comcast, leaving the company under-optimized in the fast-changing premium video industry. As we all know, today’s key industry themes include the rise of cord-cutting and consumers’ move to lower cost skinny bundles, the shift to on-demand viewing, with the accompanying growth of ad-free SVOD services (e.g. Netflix, Amazon, Hulu), the rapid adoption of connected TV and mobile devices for viewing and the nationalization/globalization of video services, among others.

On the skinny bundle front, consumer awareness is building about how these save money, cut unused channels and gain viewing flexibility. AT&T is doing its part to drive this trend by proactively shifting DirecTV and U-verse subscribers to DirecTV Now with very inexpensive offers. By contrast, Comcast doesn’t have a strong skinny bundle it can use to save video subscribers calling to downgrade, which is almost certainly contributing to accelerating video subscriber losses (I had the experience personally when I called Comcast to inform them I was dropping my video service, there was no attempt to retain me).

Meanwhile, the move to on-demand and SVOD is well-documented. Netflix alone has over 57 million U.S. subscribers and is influencing every aspect of the video industry today (content creation, distribution, pricing, etc.), while prompting industry M&A activity. As well, Netflix is conditioning viewers to the joy of binge-watching multiple episodes without ever seeing an ad. With NBCU still heavily reliant on advertising, the rise of ad-free viewing is a real threat.

Connected TV and mobile viewing are booming. CTV devices are becoming ubiquitous and more premium video consumption is moving to them. Comcast has a terrific product in its X1 set-top box, but its Achilles heel is that it’s expensive (upward of $20/month for the DVR-enabled model). With sale prices for CTV devices like Roku and Fire TV Stick starting at little more than this, when combined with a skinny bundle, consumers can save a lot of money. No wonder that X1 penetration is leveling off and might even start contracting in the coming quarters.

Finally, as the big 3 of Netflix, Amazon and Hulu are showing, video services are now national and even global in scope. Consider, with approximately 22.3 million video subscribers, Comcast now has only a little more than Hulu, the smallest of the three (though a multiple of the revenue to be sure). Netflix has over 130 million global subscribers and Amazon likely close to that watching video on its services. These companies’ scale gives them major new competitive advantages.

In light of all of this, Comcast could have dramatically strengthened its competitive position by taking control of Hulu. Hulu is a unique asset - a nationwide 20 million plus subscriber OTT business including a huge SVOD library monetized with and without ads, a burgeoning skinny bundle business that likely now has a million or more subscribers, a well-recognized brand name, a fantastic user experience that is highly CTV focused and is growing strongly.

Comcast could have leveraged Hulu in many ways: to strengthen its X1 experience as part of a lower cost triple play bundle for prospective cord-cutters, to establish a national presence, to learn about the ad-free SVOD business, to learn about the emerging world of data-enabled/programmatic TV advertising and to gain insights about viewers’ shifting behaviors, among others. It could have also given Comcast more heft when negotiating for content with major studios and networks.

In short, Hulu would have given Comcast a front row seat to immerse itself in every one of the most significant trends driving the industry today. Worse for Comcast, because Disney will presumably now take control of Hulu, Disney will have not one, but two major SVOD services when it launches its own next year. That will surely change the dynamics of the video industry further and it’s awfully hard to see Comcast not being further disadvantaged as this plays out.

I have a lot of respect for Comcast’s management team, but I have to say I’m quite surprised that it is walking away from Hulu without trying to make a side deal with Disney to buy its 30% stake. Comcast has traditionally expressed skepticism about Hulu, but earlier this year NBCU head Steve Burke said “We think Hulu is a great business, has great prospects. We expect to be able to own it, we would love to have it.”

Now it looks like that won’t be happening. Instead of Comcast strengthening its place in its core U.S. market, it’s choosing to spend billions expanding internationally through the expensive, potential Sky acquisition. That’s a choice I don’t understand. I hope analysts ask about this decision on next week’s Q2 earnings call.